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Airtel Has Strong Balance Sheet: Goldman Sachs

Bharti Airtel, is staying strong and growing and has a robust balance sheet, said broking house Goldman Sachs.

Airtel has a robust balance sheet, and a “best-in-class” spectrum footprint position which favours Bharti Airtel for future network roll-outs and market share gains. With declining capex intensity and rising margins on stable revenue growth, we expect Bharti to be FCF (Free Cash Flow) positive in financial year 2020-21, Goldman Sachs said in a report.

The report said the telecom operator has a strong wireless business growth potential.

“We forecast a 30% EBITDA growth CAGR for India wireless (46% of FY19E revenue) in FY19-22E driven by market share gains, customer upgrades/better customer monetization in data, and tariff hikes. With a recovery in India wireless, steady growth in Africa, and stable non-wireless businesses, we forecast Bharti to deliver an 8 to 18% revenue/EBITDA CAGR in FY19-22E”, it said.

The broking house also said the telco has solid growth outlook for Africa. “We forecast a 9 to 11% revenue/EBITDA CAGR in FY19-22E for Bharti’s Africa business (24% of FY19E revenue) driven by data and mobile money.”

“Its valuation is at t 8.5x CY20E EV/EBITDA, Bharti trades higher than its own historical average (of 7.3x) and its Asian telco peer median (of 7.1x). However, we expect Bharti’s EBITDA growth over the next two-to-three years to be more than 3x its Asian telco peers and view a higher multiple as justified; Bharti trades in line with Asian peers on CY21 EV/EBITDA.

“Our 12-month Discounted Cash Flow-based Trading Price of Rs. 415 implies 15% upside; our bull/bear scenarios suggest 40% upside vs. 13% downside.”―Livemint

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